The Idaho Public Utilities Commission has approved three energy
sales agreements between Idaho Power Company and a Boise-based wind developer
who will build three wind farms in the Hagerman area.

The sales agreements are with Exergy
Development Group of Idaho, which plans to build all three projects under the
provisions of PURPA, the Public Utility Regulatory Policies Act of 1978. PURPA
requires electric utilities to offer to buy power produced by qualifying
small-power producers or co-generators. The rate to be paid project developers,
called an “avoided cost rate,” is to be equal to the cost the electric utility
avoids if it would have had to generate the power itself or purchase it from
another source.

The three projects – Camp Reed (22.5 MW), Payne’s Ferry (21
MW) and Yahoo Creek (21 MW) – are scheduled to begin operating Sept. 30, 2010.
Under the agreements, each of the plants will deliver up to 10 average
megawatts on a monthly basis, which is the upper limit of the size of projects
that can qualify for PURPA posted rates.

The projects are among the first PURPA wind agreements
signed since the resolution of a major case involving all of Idaho’s regulated
electric utilities and wind developers. Because of the intermittency of wind
generation and its impact on the utility transmission grid, the posted rate
paid to wind developers is reduced to reflect the utility’s cost of integrating
the generation into its system. Wind developers must also provide mechanical guarantees
and share in the expense of wind forecasting. In exchange, the utilities agreed to drop a
provision that penalized wind developers if their actual generation output was
less than 90 percent or more than 110 percent of their projected output.

These wind agreements are also unusual in that the contracts
are for levelized rates rather than non-levelized rates. Levelization means
that the developer is paid an energy price at the front-end of the 20-year
agreement that is in excess of the actual energy value. The overpayment is
recouped in later years when the payments are projected to be less than the
value of the power. Levelized rates can be an incentive to cogeneration and
small-power development because it helps project developers recoup up-front
expenses more quickly. But few developers choose this option because of the
accompanying security requirements put in place to discourage contract default.
In the event of a default, some project owners may not be unable to refund the
utility the overpayment that comes in the early years of a levelized contract.

The developer of these three wind projects has agreed to
meet various security requirements in addition to a maintenance reserve account
of at least $2 million.

Under the 20-year contracts, Idaho Power will pay the posted
rate of $84.40 per megawatt-hour during months of normal demand, which include
January, February, June, September and October. During the months of heavy
demand (July, August, November and December), Idaho Power will pay $102.58 per
megawatt-hour. During months of less-than-normal demand (March through May),
Idaho Power will pay $61.47 per megawatt-hour. Those rates include the wind
integration charge and are adjusted slightly during heavy-load hours and light-load
hours of the day.

Documents related to these
cases, including the commission’s orders, can be accessed on the commission’s
Web site at www.puc.idaho.gov. Click on
the electric icon, select “Open Electric Cases” and scroll down to case numbers
IPC-E-09-18, -19 and -20. Interested parties may
petition the commission for reconsideration by no later than Oct. 29. Petitions
for reconsideration must set forth specifically why the petitioner contends
that the order is unreasonable, unlawful or erroneous. Petitions should include
a statement of the nature and quantity of evidence the petitioner will offer if
reconsideration is granted.

Petitions
can be delivered to the commission at 472 W. Washington St. in Boise, mailed to
P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.